Court stays eight-month suspension for pressuring residential school survivor to pay legal bills
The Saskatchewan Court of Appeal has overturned the Saskatchewan Law Society’s suspension of high-profile lawyer Tony Merchant for sending a “threatening” letter to a residential school survivor client saying she should use her settlement money to pay unrelated legal bills.
In October 2020, the law society imposed an eight-month suspension on Merchant for his attempts to pressure the client, which included asking to hold back from the settlement money the more than $21,000 owed to clear outstanding bills not related to the settlement.
The suspension was granted more than a year after the Hearing Committee of the law society ruled Merchant was guilty of conduct unbecoming of a lawyer on two counts – that he had “induced [the client] to provide an assignment prohibited under Section 18.01 of Indian Residential School Settlement Agreement, and that he [had] acted on that improper assignment.”
An assignment – when property is transferred from one person to another – is not allowed under the IRSSA system for paying residential school survivors.
In his April 2014 letter to the client, Merchant wrote: “You owe the money. You agreed to pay the money . . .. We could sue you for the $21,310.83. My expectation is we would succeed with that lawsuit and obtain a judgment against you. We could then seize your assets, your car, your bank account, or whatever, in order to collect these debts that you owe.”
Tony Merchant, Merchant Law Group
In the letter, Merchant acknowledges that he had “no legal right to enforce assignments against you, notwithstanding the fact that for these . . . other criminal defence matters . . . you agreed and promised that you would pay the accounts out of the money that we expected you would receive from your [settlement] claim.”
The letter goes on to say: “In fairness and acting honestly, you should instruct us to pay the $21,310.83 out of the money that we are going to send to you or instruct us to pay a part of that money if you decide that you will not pay it all, even though it is allowing , and decide that you will instruct us to pay $15,000 or $10,000 out of the money that you owe.”
However, the letter says, “if you contact me and instruct me not to deduct any of the money, we will follow those instructions and pay $76,260.00 without deduction.”
He added that the firm regularly contacts clients “in a manner similar to my contact with you and remind our clients that they owe the money even if the assignments are not legally enforceable and seek instructions.”
The Merchant Law Group led the class-action lawsuit against the federal government that led to compensation for residential school survivors in 2005, making it responsible for the disbursement of the settlements. The complaint against Merchant was brought forward by the chief adjudicator of the Independent Assessment Process, who believed Merchant had broken the rules around residential school payments.
In his defence, Merchant argued that the letter was simply a direction to pay the bill. He also claimed he honestly believed the letter was not breaking the rules of the agreement.
The appeal court panel of three judges disagreed with the society’s ruling and overturned it in a decision released Jan. 5.
“The Hearing Committee erred in finding Mr. Merchant guilty of conduct unbecoming of a lawyer,” the court decision said. “It misapprehended the law by concluding that directions to pay are assignments.”
While Merchant Law Group fought efforts to have the firm return the $21,310.83 to the client in the British Columbia court system, that but both the Superior Court and the Court of Appeal ruled that the money was “impermissibly withheld” and said the firm must pay the money back with interest.
Merchant applied to appeal those decisions to the Supreme Court of Canada but was denied.
Merchant argued to the Saskatchewan Court of Appeal that even though both B.C. courts both determined the letter he sent the client did amount to an assignment, it did not diminish the sincerity with which he held that belief.
He also argued that he responded to the concerns raised concerning the legality of the direction to pay by applying to the court for guidance and, in all respects, acting in an open and professional manner.
As well, Merchant asserted the Hearing Committee’s decision runs contrary to the judgment of the Supreme Court of Canada in Groia v Law Society of Upper Canada, and that in reaching its decision, the Hearing Committee made findings of fact and “drew inferences in the absence of any evidence to support them.”
Madam Justice Jacelyn A. Ryan-Froslie, writing on behalf of the Saskatchewan appeal court, wrote that he finds that “Merchant’s argument on this point is persuasive.”
“In my view, Mr. Merchant’s appeal against the Conduct Decision should be allowed,” Justice Ryan-Froslie wrote. “The Hearing Committee erred in finding . . . Merchant guilty of conduct unbecoming of a lawyer.” She also said the committee “misapprehended” the law by concluding:
- that directions to pay are assignments;
- that the pre-2014 jurisprudence is clear that directions to pay fall within the purview of Article 18.01 of the IRSSA;
- and that Merchant’s specialized knowledge of the Indian Residential School Settlement process.
The Hearing Committee, Justice Ryan-Froslie, wrote, “had no evidence of Mr. Merchant’s involvement in the IRSSA settlement and, in particular, that he had any ‘special knowledge’ of what was meant in Article 18.01 by the use of the term “assignment.”
She added that as a result, the “Hearing Committee’s conclusion in this regard is thus unsupported by the evidence.”
Canadian Lawyer sent a message to Merchant asking for comment, but has not yet received a reply.
